Tough competition and advantages of scale will drive consolidation in the APAC telecoms industry ahead of higher 5G investments, said global credit rating agency Fitch Ratings in a new report.

“The 5G technology will favour larger operators with strong balance sheets, which we expect to contribute to diverging credit quality over time among telcos,” said the report entitled “Asia-Pacific Telecoms – Peer Review”.

Scale becomes increasingly important for telcos to drive cost efficiencies and manage cash flows amid a subdued growth environment. Data monetisation remains a challenge in most markets, aggravated by price competition and the lack of differentiation among product offerings.

Rating headroom is low for four of the nine companies covered in our report, indicating these four companies have limited capacity to take on more debt at their current rating levels. Spectrum assignments and renewals will take place over the next 18 months in India, Australia, Thailand, Korea, Malaysia and Hong Kong, underlining the emphasis on capital preservation through staggered investment, dividend reduction and asset sales.

PT Telekomunikasi Indonesia Tbk (BBB/Stable) is the only company with high rating headroom, while Singapore Telecommunications Limited (A/Stable) has the least. – TradeArabia News Service